Macro final exam

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

What items could cause equilibrium quantity to go up

-Demand -Supply goes up

Match the changes with the outcomes. These are concerning shifts in supply and demand.

-Price go up because of change in supply - Price go down because of change in supply

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate:

2.10%

What is a chart that shows all possible combinations a country can produce of two different goods. It shows the trade off of producing more of one good over another one.

A Productions Possibility Frontier

Which of the following is included in the calculated Gross Domestic Product?

A local ice cream store sells $17,000 worth of cones and sundaes on July 1.

Who wrote: "The Wealth of the Nations"?

Adam Smith

In the Circular Flow Model do businesses demand or supply? (tricky question, think about it, there are two markets in the model)

Both

Ethiopia has a GDP of $8 billion (measured in U.S. dollars) and a population of 55 million. Costa Rica has a GDP of $9 billion (measured in U.S. dollars) and a population of 4 million. Calculate per capita GDP for each country.

Ethiopia = $145.00 Costa Rica = $2250.00

A nation's prosperity is sometimes measured in terms of ___________.

GDP per capita

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:

Goods X and Y are complement goods.

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?

It would fall.

Which one looks at the big picture

Macroeconomics

A surplus happens when

Market price is above market equilibrium

Most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.

Market-oriented economy

_______________________ are economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the _____________.

Neoclassical economists; long run

________________ economists place an emphasis on __________ run economic performance.

Neoclassical; long

_________________ results when an economy experiences high unemployment and high inflation at the same time.

Stagflation

If the government saw that consumer confidence was excessive, what step could it take to shift the AD to the left?

The Federal Reserve could increase interest rates.

From a neoclassical view, which of the following is a true statement?

The economy cannot sustain production above its potential GDP in the long run.

In a market for a good, if there is a shift in supply (supply goes up). What happens to demand?

There is a movement down along the demand curve.

Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

Choose the correct statement concerning natural disasters.

They create jobs at the expense of other jobs, and they destroy wealth

Increased investment alone will guarantee economic growth.

This is a false statement, because economic growth hinges on the quality and type of investment as well as the human capital and improvements in technology.

If measuring opportunity cost on a budget constraint line. Can the opportunity cost be less than one? Can it be one-half a good?

True

Is the budget constraint a visual of the opportunity cost between two goods?

True

The demand curve has a negative slope

True

What does a budget constraint show?

Various combinations of goods or services an individual can purchase with their income.

In the chart below, arrow B represents a shift in aggregate supply that can be explained by ________ ________

a decrease in input prices

Which of the following results in a rightward shift of the market demand curve for labor?

a decrease in the firm's product price

If an economy experiences a decrease in aggregate demand due to a decline in consumer confidence and output falls below potential GDP, which of the following is likely to occur?

a rise in unemployment

In the neoclassical version of the AD/AS model, which of the following should you use to represent the AS curve?

a vertical line drawn at the level of potential GDP

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay.

adverse selection of wage cuts

In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output.

aggregate demand (AD)

Any given demand or supply curve is based on the ceteris paribus assumption that ___________________.

all else is held equal

The term "ceteris paribus" means that:

all variables except those specified are constant.

In macroeconomics, the connection from inputs to outputs for the entire economy is called _______________.

an aggregate production function

Which of the following will not result in a rightward shift of the market supply curve for labor?

an increase in labor productivity

Which of the following factors contribute to economic growth?

an increase in the proportion of the population that is college educated

Which of the following will not result in a leftward shift of the market demand curve for labor?

an increase in the wage rate

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.

business cycle

Which of the following is not included in GDP?

cash income paid to a day laborer that is not reported to the tax authorities

The demand measure of GDP accounting adds together:

consumption, investment, government purchases, and trade balance.

Which of the following represents a Keynesian point of view of macroeconomics?

creating increases in aggregate demand to reduce unemployment

The type of unemployment that occurs because of a recession is called:

cyclical unemployment.

Another term used to describe negative inflation is:

deflation

With regard to the economy, the term negative inflation is synonymous with which of the following?

deflation

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers.

division of labor

Which of the following is generally accepted as a valid criticism of the production of useful goods and services?

environmental pollution

Which of the following is a distinguishing characteristic of the neoclassical view?

flexibility of wages and prices over time

The circular flow diagram of economic activity is a model of the:

flow of goods, services, and payments between households and firms.

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:

frictionally unemployed.

The effects of inflation are seen in:

goods, services, wages and income levels

In the long run, the most important source of increase in a nation's standard of living is a:

high rate of economic growth.

Consumption is the purchase of goods and services by:

households

When prices of outputs in an economy become sufficiently high causing production to exceed potential GDP, the resulting:

hyper-intense production will be unsustainable in the long run.

Improvements in the productivity of labor will tend to:

increase wages

Which of the following is most likely to contribute to economic growth as measured by GDP per capita?

increased capital formation

__________ implies that pressure for price increases reaches across _______________markets, not just one.

inflation; most

If a neoclassical model shows increasing wages in the economy over the long run, what else will likely occur?

inflationary increase in price level

Which of the following best describes a monetary policy tool?

interest rates

Investment in human capital:

is characterized by both b) and c).

Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________.

law of demand

If the aggregate demand (AD) equals aggregate supply (AS)

macro equilibrium occurs.

The unemployment rate may underestimate the true extent of unemployment if:

many people become discouraged and cease looking for work.

The basic difference between macroeconomics and microeconomics is:

microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Which component of aggregate demand would initially be affected by a change in exchange rates?

net exports

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

ongoing rise

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer�s true cost of living, because it doesn�t take into account that the person can substitute between goods according to changes in their relative prices.

overstate

The �law of supply� functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price

The value of what is produced per worker, or per hour worked, is called ____________.

productivity

To achieve a high standard of living, a nation should:

promote economic growth.

One factors that complicate the calculation of the inflation rate is:

quality bias sometimes called new product bias

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________.

quantity supplied

The difference between nominal GDP and real GDP is:

real GDP adjusts for inflation

In an Aggregate Demand-Aggregate Supply model:

real GDP is shown on the horizontal axis.

Economists typically measure economic growth by tracking:

real GDP per capita.

The __________________ is the nominal interest rate minus the rate of inflation.

real interest rate

The nominal value of any economic statistic refers to the number that is actually announced at that time, while the ________________ refers to the statistic after it has been adjusted for inflation.

real value

A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will:

shift to the right, decreasing the price of the drug

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer�s true cost of living, is:

substitution bias

As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

technology

The most commonly cited measure of inflation in the United States is:

the Consumer Price Index (CPI).

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

the benefit to his grades from studying for an hour

In the circular flow model looking at just firms and households. Do physical goods and money flow in the same direction?

the cost of haircuts received during the school term

The opportunity cost of attending university is likely to include all except which of the following?

the cost of haircuts received during the school term

If a nation's labor force receives a significant influx of young workers:

the natural rate of unemployment is likely to increase.

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________.

the quantity demanded of financial capital at any given interest rate will shift to the right.

Which of the following is included in GDP calculations?

the university tuition paid to enroll in a course

GDP does not directly include:

the value of intermediate goods sold during a period.

Frictional unemployment is:

unemployment that is due to normal turnover in the labor market.

Scarcity exists because of:

unlimited wants and limited resources.

In the neoclassic model, economic growth over time shifts potential GDP and the ______________ gradually to the right.

vertical AS curve

Which of the following is a building block of neoclassical economics?

wages and prices will adjust in a flexible manner

In the market for labor. What happens to real wages when there is an increase in the demand curve?

will increase